EC 110 Final: MICRO FINAL EXAM OUTLINE
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Answer the following questions pertaining to the graph.
1. What is the shape of the AVC and ATC curves? What economic law accounts for this shape? How do you know this?
2. What is the shape of the MC curve? Why does it have this shape? How do you know this?
3. What do you know about the values of AVC and ATC at the points where MC crosses them?
4. Is the AVC higher than the ATC or lower than it? How do you know this?
5. Is the costs in the short run or the long run? How do you know this?
6. Assume the company above is in a Perfect Competition Industry: If the price of the product is $20 that is sold at, what will be the profits and how many will be sold at that price? Can the company raise the price?
7. Again in a Perfect Competition Industry: What would the profit situation be at a price of $30, how much to sell at that price?
8. With the Perfect Competition industry: What would the profit situation be at a price of $10, how much to sell at that price?
9. What are the characteristics of a perfect competition company and industry?
Following is the complete table -
Q |
FC |
VC (TC-FC) |
TC |
AFC (FC/Q) |
AVC (VC/Q) |
ATC (TC/Q) |
MC (TCn-TCn-1) |
0 |
10 |
0 |
10 |
- |
- |
- |
- |
1 |
10 |
10 |
20 |
10 |
10 |
20 |
10 |
2 |
10 |
18 |
28 |
5 |
9 |
14 |
8 |
3 |
10 |
23 |
33 |
3.33 |
7.67 |
11 |
5 |
4 |
10 |
33 |
43 |
2.5 |
8.25 |
10.75 |
10 |
5 |
10 |
48 |
58 |
2 |
9.6 |
11.6 |
15 |
6 |
10 |
68 |
78 |
1.67 |
11.33 |
13 |
20 |
7 |
10 |
98 |
108 |
1.43 |
14 |
15.42 |
30 |
8 |
10 |
148 |
158 |
1.25 |
18.5 |
19.75 |
40 |
1) Consider a firm that has a fixed cost of $70. Complete the following table:
Output |
FC |
VC |
TC |
MC |
AFC |
AVC |
ATC |
1 |
Ā |
$20 |
Ā |
Ā |
Ā |
Ā |
Ā |
2 |
Ā |
28 |
Ā |
Ā |
Ā |
Ā |
Ā |
3 |
Ā |
40 |
Ā |
Ā |
Ā |
Ā |
Ā |
4 |
Ā |
56 |
Ā |
Ā |
Ā |
Ā |
Ā |
5 |
Ā |
80 |
Ā |
Ā |
Ā |
Ā |
Ā |
Ā
2a) A publisher initially prices both hardback books and paperback books at $30 per book. Each book costs $3 to produce. Complete the following table.
Ā |
Price |
Quantity |
Total Revenue |
Total Cost |
Profit |
Hardback |
$30 |
150 |
Ā |
Ā |
Ā |
Paperback |
30 |
150 |
Ā |
Ā |
Ā |
Total |
Ā |
300 |
Ā |
Ā |
Ā |
Ā
b) The price elasticity of demand for the hardback is 0.6 and the price elasticity of demand for the paperback is 3. Suppose the publisher increases the price for hardback by 10% and decreases the price of paperback by10%. Complete the following table.
Ā |
Price |
Quantity |
Total Revenue |
Total Cost |
Profit |
Hardback |
Ā |
Ā |
Ā |
Ā |
Ā |
Paperback |
Ā |
Ā |
Ā |
Ā |
Ā |
Total |
Ā |
Ā |
Ā |
Ā |
Ā |
Ā
Ā